In-Depth

Vertical Markets Equals Vertical Opps: Industry Strategies to Drive IBM’s S/390 Platform Deployment

• 06/01/2000

Between the external market forces driven by e-business trends in all their flavors, and the internal chaos being visited on enterprise IT staffs as they accommodate a dizzying array of intranets, extranets and their integration into the public Internet, IBM is settling on a solutions sales strategy for its S/390 Multiprise 3000 enterprise server that revolves around solving industry-specific issues.

According to both industry observers and company officials, IBM is positioning the S/390 platform as the mainframe standard of choice for industries going through massive re-engineering efforts to keep pace with changing markets, and with advancing technological changes inside and outside of their specific industries. As industries develop new business conventions over which to integrate supply chain systems, IBM wants to cash in on emerging requirements for high-capacity data processing power that promise to reintroduce mainframes into the enterprise computing mainstream.

Beyond selling the technical spec sheets of the S/390 product line, the marketing and sales organization is developing a series of industry-solution approaches and services that provide customers with a variety of purchasing and leasing options that address an even wider array of enterprise budgets.

To hear company officials explain it, IBM wants to offer its customers the ability to add systems as business requirements demand it, rather than buying all the computing capacity up front.

Industry observers are finding the strategy provocative. According to Charles Burns, Vice President of Giga Information Group, the newest version of the S/390 is uniquely positioned to fill many of the needs businesses have in the evolving economy.

But whether or not the strategy is a winning one still remains to be determined, says Charles Greiner, Vice President and Director of the Enterprise Data Center Strategies Group for META Group. While impressed with the introduction of the emerging strategy, he sees IBM facing challenges getting into any company that wants to get running quickly, even though the S/390 has better scalability than some competing systems.

IBM is offering the product to the market as three separate solutions, explains Burns. The newest generation of the S/390, which became available in May, gives companies who have been operating older, less powerful mainframes, the ability to upgrade from systems running at between 2 and 20 MIPS to 65 MIPS, while simultaneously producing substantial maintenance savings. According to Burns, the older machines cost so much to maintain that the savings on maintenance charges alone can, in many instances, justify S/390 investments.

Whereas the older machines are huge, water-cooled behemoths, the newest version of the S/390 is about the size of a double-door refrigerator, with energy and cooling costs that are 90 percent less than legacy machines, according to IBM. The hardware is also preloaded with the operating system, making it relatively easy to set up and run, compared to older systems.

In fact, to further distinguish the new product from its legacy reputation in the market place, IBM is avoiding the "M" word (mainframe), officially referring to the S/390 as a server platform.

Still, at 65 MIPS, the S/390 is not your average print server. The S/390 is touting an open architecture for implementation flexibility as a standalone server for ERP, or in concert with UNIX or Windows NT application servers certified by a specific application provider.

IBM is targeting large companies in specific vertical industries that need a robust application development platform upon which they can deploy industrial-strength electronic commerce strategies.

"E-business exploitation is a world of unpredictable user types and unpredictable peaks and valleys in transaction volumes," according to one IBM official. "These marketplace dynamics can leverage S/390’s capabilities to handle multiple workload processing and balancing. Integrating all multiple applications on a single server, rather than many smaller servers, helps eliminate bottlenecks and simplify system management."

IBM touts the S/390 multiprise system as an effective enterprisewide business solution that integrates all the activities and processes of a company into a unified information system. Application and data changes made by one part of the organization can be automatically reflected throughout the organization, so that current information can be immediately available to those who need it most.

For those companies that need a little more computing power, but aren’t interested in immediately going to the S/390, IBM offers the system as a solution service to handle growing processing needs. As with application development, this approach helps IBM get its foot in the door, with the hope of eventually converting an entire company’s system.

According to Burns, there isn’t another mainframe manufacturer that offers a direct competitive product right now, and believes that it will be at least six months to a year before anyone does.

The competition is really one of an operating platform battle between the S/390 and UNIX, Burns explains, each has its benefits. Whereas the S/390 platform offers industrial strength, high availability and a high level of security, UNIX boasts low-support costs and a user-friendly interface.

In December, IBM appealed to those IT managers who prefer UNIX by enhancing the open characteristics of the S/390 platform by offering interoperability between Linux and the OS/390, VM/ESA and VSE/ESA operating systems. According to IBM officials, S/390 systems running OS/390, VM/ESA or VSE/ESA can now operate as a server for Linux clients, work with a Linux peer or work with a Linux server. With this additional capability, the S/390 can extend file serving, data, print and other services to Linux-based systems throughout an organization.

IBM is also working closely with software vendors who are offering the S/390 as part of an enterprise resource planning (ERP) package. This enables IBM to piggyback its platform with offerings from companies like Baan, Oracle, PeopleSoft and SAP, without needing to add to its own sales staff.

But the key to S/390 will be how it fares in the struggle to resonate with its target vertical markets.

Financial services companies, including banks, insurance companies and investment firms, are in the midst of major data warehousing and data mining upgrades as they try to make sure that they target and serve their most profitable customers.

The role of data warehousing and data mining strategies is going to be even more important when various players in the financial services sector, banks and insurance companies, for instance, start to enter each other’s business, as allowed by recently passed banking reform legislation.

That legislation is expected to accelerate the rapid consolidation of the banking industry and other financial services firms. As institutions merge and the data records of clients become more complex, the need for high-capacity processing power and scalable computer systems – features of the S/390 that IBM strongly promotes – is expected to grow exponentially.

S/390 platforms have a strong and embedded presence in this industry. Since the banks have already been using the S/390 platform, it is easier for them to use the platform for additional capabilities than to start from scratch with a new platform, says Peter McCaffrey, IBM Manager of S/390 Enterprise Systems Marketing.

Financial services companies are using the S/390 for more extensive internal functions as well. As institutions develop more targeted marketing activities, strive to detect likely credit card fraud, and predict possible changes in financial markets, corporate knowledge workers need to get at information quickly.

"Moreover, banks are moving to customer relationship management systems to improve customer loyalty," he says. "It’s all about monitoring your customer base."

For example, Key Bank, a $75 billion institution headquartered in Cleveland, is using the S/390 to offer differentiated services to customers. Key, like many other large financial institutions, uses the S/390 in its call center operations, enabling call center agents to pull up customer account information and provide fast service, without the need to place customers on hold.

An increasing amount of brokerages and other financial services companies are also moving customers to the less costly Internet delivery channel, which helps companies grow, while reducing overhead expenses. Nowhere is this more true than in the online trading arena, which has seen explosive growth, both in terms of new firms offering online trading, and of older, established firms moving some or all of their trading to the Internet channel.

The online brokerage industry has seen significant growth over the past two years, expanding beyond the early adopter stage to where mainstream traders, and even mainstream brokerage firms like Merrill Lynch, are doing much of their business via the Internet.

IBM and Charles Schwab & Co. Inc., the nation’s largest discount broker, are working together on the next generation technology for the online brokerage industry. Schwab was already using IBM’s S/390 servers and Parallel Sysplex clustering technology to support its operation, handling more than $10.4 billion a week on the Internet alone.

In a Parallel Sysplex cluster, all data is available to every server, allowing workload to be moved to any server in the cluster in the rare instance of a system failure. This becomes more critical as stocks – particularly Internet stocks – have sharp price swings from hour to hour, and, sometimes, even from minute to minute.

As quickly as the price swings, so does the volume, McCaffrey explains. Brokers offering online trading need to be able to handle large spikes in capacity. The Parallel Sysplex system enables companies to add servers to the cluster as demand grows. Every indication from the brokerage industry shows Internet trading continuing to soar.

IBM will work with Schwab to deploy IBM’s Geographically Dispersed Parallel Sysplex technology (GDPS), which enables servers located as far as 25 miles apart to share data as if they were side by side. This new technology is expected to maximize Schwab’s ability to handle unexpected volume swings and any random site outages, in an effort to end user service disruptions.

The dramatic changes in how health services are delivered in the United States has created an unprecedented spike in demand for information and communications systems that automate and integrate processes from multiple healthcare providers. The ensuing market, according to McCaffrey, is ripe for technologies like the S/390 platform.

For example, the University of Iowa Hospitals and Clinics (UIHC) has moved to electronic record keeping for its more than 500,000 annual ambulatory clinic visits and patient admissions. Specialized care is provided by more than 1,300 physicians and dentists, 1,500 professional nurses and 4,700 other professional and support staff. On a typical day, 650 patients are hospitalized among the 48 nursing units, and another 2,000 patients receive care in 251 different clinics. At any given time, 150 or more research trials are underway at UIHC.

Paper processing of all of this information would be cumbersome, if not impossible. As a result, UIHC maintains its records electronically, using the S/390 to provide up-to-the-minute information to doctors and support staff. Pulling together information, like prescription medication and medical history, can also help patients get the proper care in emergency room situations where the data is needed immediately, and there is no time to sort through paper records.

Like many industries in the new hyper competitive global economy, healthcare companies are in a period of rapid consolidation. Companies face the need to handle large, consolidated volumes of electronic claims, even as new systems are developed to address the move from the fee-for-service business model, to one based on managed care principles. Consequently, new applications are emerging to help healthcare companies handle billing and payment transactions, McCaffrey says.

In the past, the billing, invoicing, patient record and other data have resided in discrete islands of information systems. IBM is positioning the S/390 system as a tool to integrate and connect these systems to make the business process cycle more efficient, and drive unnecessary administrative costs out of the healthcare system.

Manufacturing firms continue to look to corporate intranets, the Internet and e-commerce to find ways of driving down the costs of capital-intensive operations.

According to analysts at DH Andrews Systems Inc., coordination levels between supply chain partners will rise dramatically, fueling increasingly higher transaction rates within the enterprise and the supply chain management systems of trading partners.

While these efforts offer enormous opportunities for increased productivity and profits, they also require a new generation of IT solutions that can increase the speed at which these firms gather, distribute and use information to manage their operations. Therefore, manufacturing companies are moving to ERP systems that can manage several sites and different operations.

IBM is positioning the S/390 as a server, many of which can communicate together between different offices while still providing a single system image with a single view of data.

"While ERP is a powerful solution, its many functions and capabilities drive tremendous transaction workloads and generate enormous databases," says Steve Aufderheide, DH Andrews partner and IT industry analyst. "As a result, ERP systems within large enterprises can outgrow individual UNIX or Windows NT servers, forcing companies to split their applications and databases across multiple servers."

Developing ERP systems will lead to a rapid growth in the amount of data collected and the need for more processing power, according to Aufderheide. As executives get their hands on supply chain and other data, they will determine new ways of using the information to help their companies profit.

"These ideas will generate more information, requests for information and systems to support the new applications and data," Aufderheide explains.

Having spent the better part of the decade working on the development of systems that make business processes within and between companies in a supply chain operate more efficiently, many manufacturing companies are exploring ways to harness their investments in human capital to achieve strategic corporate objectives.

As a result, industry observers expect new knowledge management and collaborative computing applications to put further demands on enterprise information and communications system resources.

Government agencies at all levels – federal, state and local – have not been able to avoid the consequences of a social power shift that puts pressure on performing more tasks more efficiently with fewer financial and human resources. The labor crunch, and a growing consensus at the electoral level that fraud, waste and inefficient management is both unnecessary and intolerable, has stimulated a boom in technology deployment within government agencies and sub-agencies.

Government service agencies and quasi-government service providers are using the capabilities offered up by technologies like the S/390 to manage payments and processes and to leverage use of the Internet and electronic commerce.

Local, federal and state governments want to be able to access information across different agencies to give them a single view of government operations, Aufderheide explains. Citizens are also demanding the ability to access information around the clock.

About the Authors: Philip Britt and Lane F. Cooper are freelance authors for the Washington News Bureau, specializing in the corporate computing industry. They can be reached via e-mail at washbureau@aol.com.